Monday, August 27, 2018
New Jersey Governor Signs New Law Helping CCRC Residents Get More Timely Refunds of "Refundable" Fees
Back in April, I posted here about legislation pending in New Jersey, inspired in part by litigation. Residents of Continuing Care Retirement Communities in New Jersey were advocating for mandatory limits on how long a CCRC could hold "refundable" entrance fees after the death or departure of a resident from a facility. New Jersey CCRC residents are well-organized and they have earned the ear of legislators. Final passage on an amended version of Assembly Bills 2747/880 occurred on July 1.
On August 17, 2018, New Jersey Governor Phil Murphy signed Public Law 2018, c.98 into law. The old New Jersey Law required CCRCs to repay refundable fees, but the refunds were not mandated until 60 days of "the unit" being resold. Data collected by residents and disclosed during litigation revealed that some facilities were holding refundable fees for more than a year after the vacating of the particular unit, while marketing and selling "other" units first. In essence, the companies preferred to sell new units or other units unencumbered by a refund obligation, to maximize their income and asset picture.
The new law creates a preference list for the 60-day refunds, a type of "first out, first repaid" system. Key language of the new law provides:
"In the case of a continuing care agreement that provides for a refundable entrance fee, the facility shall assign the vacated unit a sequential 'refund' number among all available units with refundable entrance fees. Any balance [due on refundable fees] shall be payable based on the sequential 'refund' number assigned to the unit. . . . "
A compromise among facility owners and residents in the drafting of the legislation permits a facility to apply to the New Jersey regulatory body for CCRCs for permission to use an alternative methodology for making refunds, but "approval shall not be granted unless the facility can demonstrate that the use of the alternative methodology is resident-focused and provides for a more equitable and timely payment of refundable fees."
This final language appears to be more resident-friendly than an earlier proposed exception, which would have expressly recognized the possibility of conditioning refunds on the resale of "similar" units. Resident councils will probably need to be careful to review any alternative proposals submitted by their own CCRCs.
The act takes effect in 90 days from date of enactment. For more on the history of the legislation, see Signed: Bateman Law to Stop Retirement Communities From Taking Advantage of Seniors and Surviving Estate Holders.
Current residents did not get a clear win, as the new rules for refunds are mandatory only for CCRC agreements entered into on or after the effective date of the new law. Nonetheless, congratulations to CCRCs and residents in New Jersey on making changes that better respect the expectations of customers and their families about the use of funds that function, in essence, as an interest fee loan to the CCRC during the residents' tenure in the facilities.